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Debt Snowball or Debt Avalanche: How to Choose the Best Method

Ultimately, the best method depends on what drives you to aggressively tackle debt.

You have options when it comes to paying off debt. Two popular strategies are the debt snowball and debt avalanche methods.

But, which method is best for you?

To pave your way to debt freedom, it’s crucial to prioritize and select the best debt repayment strategy. Here’s how you can decide:

  1. Assess Your Debts: Start by compiling a debt list of all your credit cards, including balances, minimum payments, and interest rates. This snapshot gives you a clear picture of your debt landscape.
  2. Choose a Repayment Strategy: Two widely recognized methods for tackling credit card debt are the debt snowball and the debt avalanche.

Debt Snowball Method

The debt snowball method involves paying off debts starting with the smallest balance first, then rolling payments from paid-off debts into the next smallest balance. This approach emphasizes the psychological boost of achieving quick wins.

Example:

Credit CardBalance ($)Minimum Payment ($)
Debt 1$500$25
Debt 2$6,300$146
Debt 3$7,000$200

After paying off Debt 1, you’d apply its $25 minimum payment to Debt 2, increasing the total payment to $171. While not the most mathematically efficient, it can boost motivation.

Debt Avalanche Method

The debt avalanche method prioritizes paying off debts with the highest interest rates first. After clearing the highest-interest debt, you move on to the next-highest, cascading payments down the list. This method saves on overall interest costs.

Example:

Credit CardBalance ($)Interest Rate (%)Minimum Payment ($)
Debt 1$5,00020.99$89
Debt 2$6,30014.99$121
Debt 3$5009.99$20

After paying off Debt 1, you’d apply its $89 minimum payment to Debt 2, raising the total payment to $210.

How to Choose the Right Method

If we go with the math, the debt avalanche method would make the most sense. Since you’re paying off credit cards with the highest interest rates, you are first minimizing the total cost of carrying the debt from month to month. However, debt payoff is about what motivates you.

  • Mathematical Sense: The debt avalanche method minimizes interest costs by first targeting high-interest debts.
  • Motivation: The debt snowball method, focusing on quick wins, can keep you motivated as you see debts disappear.

Personally, I used the debt snowball method because having one card completely paid off was a milestone event in my debt-free journey. It motivated me to continue tackling the other cards.

Ultimately, the best method depends on what drives you to aggressively tackle debt. While the debt avalanche may make more sense mathematically, personal motivation is key.

Jason Vitug

Jason Vitug is a bestselling author, entrepreneur, and founder of phroogal.com and thesmilelifestyle.com. His purpose to help others live their best lives through experiential and purposeful living. Jason is also a certified yoga teacher and breathwork specialist and has traveled to over 40 countries.

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